Dairy Market: Barrel cheese prices top $2
Cash cheese prices shot higher the second week of October, though traders are skeptical. FC Stone stated in its Oct. 10 Early Morning Update, “Logic and reason do not drive these markets. Greed and fear do.”
Block Cheddar climbed to $2.12 per pound last Thursday but closed Friday at $2.10, up 10.75 cents on the week and 49 cents above a year ago.
The barrels finished at $2.0225, up 23.25 cents on the week and 66.25 cents above a year ago. Last time barrels topped $2 was Nov. 10, 2014, and that was at $2.12 per pound. The spread narrowed to 7.75 cents.
The blocks fell 2.75 cents on Columbus Day and lost another 1.75 cents Tuesday, falling to $2.0550, as traders mused on the confusing accounts of trade negotiations between the U.S. and China and weighed the morning’s Global Dairy Trade auction.
The barrels inched up a quarter-cent Monday and stayed there Tuesday at $2.0250, but a normal spread was set at 3 cents.
Midwestern cheese producers continue to report positive sales for the most part, says Dairy Market News, and a majority are primarily using internally sourced milk so production is steady to active. Spot milk was ranging around $1 over class.
Western cheese makers describe demand as adequate but not stellar. End users are not interested in taking extra loads with $2 plus prices and prefer to work through inventories, buy only as needed, and delay larger purchases until after the holidays when they hope prices ease.
Export sales are challenging as international buyers can find cheese at lower prices elsewhere.
However, domestic retail accounts, food service and pizza sales are enough to keep U.S. cheese moving and prices supported. Western cheese output is running full and, while producers would like sales to be livelier, the deals are keeping inventories in check.
Cash butter fell to $2.0575 per pound last Wednesday, lowest CME price since Feb. 12, 2018, but closed Friday at $2.0950, 9 cents lower on the week and 15.5 cents below a year ago. Thirty-two cars traded places on the week, 28 on Friday.
Monday’s butter was up a penny and a half and tacked on another penny Tuesday, hitting $2.12 per pound.
Butter inventories are reportedly in balance, says DMN, but producers suggest fall demand is beginning or about to begin chipping them down. Cream availability is similar. Butter makers are finding loads regionally as well as receiving offers from the West. Butter inventories are in balance and some are running churns lighter but market tones “remain in a questionable place,” says DMN.
Western butter supplies are declining but are plentiful. Cream is available at affordable prices so butter output has been active. Retail and bulk butter demand is solid but below industry expectations.
The U.S. will impose a 25% tariff on incoming European butter and other dairy products on Oct. 18 if consensus is not reached about trade issues. International butter prices at the present time are below U.S. prices, giving a competitive advantage to global suppliers.
Grade A nonfat dry milk closed Friday at $1.1650 per pound, up 2 cents on the week and 29.75 cents above a year ago.
The powder inched a quarter-cent higher Monday and was unchanged Tuesday, holding at $1.1675, highest since Feb. 18, 2015.
Dry whey closed Friday at 30.25 cents per pound, down 2.5 cents on the week and 26 cents below a year ago. A lot of product made its way to the market of last resort; namely 71 cars last week and 80 the week before.
Monday’s whey was down a half-cent but it regained a penny Tuesday, climbing back to 30.75 cents per pound, with sales slowing to 9 on Tuesday and 7 on Monday.
GDT up 0.5%
The weighted average of products offered in Tuesday’s Global Dairy Trade auction moved higher for the third consecutive session, up 0.5% following a 0.2% rise Oct. 1 and the 2.0% jump on Sept. 17. Sellers brought 85.3 million pounds of product to the market, up from 82.4 million pounds in the last event.
Rennet Casein led the charge higher, up 3.6%, following a 0.7% rise on Oct. 1. Skim milk powder was up 2.4%, after a 2.7% rise, and anhydrous milkfat was up 0.8%, unchanged in the last event.
GDT Cheddar again led the losses, down 2.2%, following a 3.4% dip. Butter inched 0.4% lower after slipping 0.2% last time. Whole milk powder was unchanged after slipping 0.2% last time.
HighGround Dairy equated the butter price to $1.86 per pound U.S. CME butter closed Tuesday at $2.12. GDT Cheddar cheese equated to $1.65 per pound and compares to Tuesday’s CME block Cheddar at $2.0550.
GDT skim milk powder averaged $1.24 per pound and whole milk powder averaged $1.42. CME Grade A nonfat dry milk closed Tuesday at $1.1675 per pound.
The Agriculture Department again raised its 2019 milk production estimate in the latest World Agricultural Supply and Demand Estimates report, based on higher cow numbers and stronger growth in milk per cow. The 2020 forecast was upped from last month on expected continued gains in milk per cow.
2019 production and marketings were estimated at 218.2 billion and 217.1 billion pounds, respectively, up 200 million pounds from last month’s estimate on production at 100 million pounds higher on marketings. If realized, 2019 production would be up 600 million pounds, or 0.3% from 2018.
2020 production and marketings were estimated at 221.6 billion and 220.5 billion pounds, respectively, up 400 million pounds and 300 million pounds, respectively, from last month’s estimates. If realized, 2020 production would be up 3.4 billion pounds, or 1.6% from 2019.
Cheese and NDM prices for 2019 were raised but price forecasts for butter and whey were reduced. The Class III milk price was raised from last month as the higher cheese price more than offsets the lower whey price.
Look for the Class III to average $16.55 per cwt., up a dime from last month’s estimate and compares to $14.61 in 2018 and $16.17 in 2017. The 2020 average is now pegged at $17.20, up 15 cents from last month’s projection.
The Class IV price was raised as the higher NDM price more than offsets the lower butter price. It is estimated to average $16.20, up a nickel from a month ago and compares to $14.23 in 2018 and $15.16 in 2017. It’s projected to average $16.10 in 2020, down a nickel from last month’s estimate.
Cheese and NDM prices for 2020 were also raised from the previous month, but the price forecast for butter was reduced and whey was unchanged. As a result, the Class III price forecast is higher, but the Class IV price is lowered, as the higher NDM price is more than offset by the lower butter price.
August fluid falls
U.S. fluid milk sales fell in August, following a small increase in July. USDA’s latest data shows 3.87 billion pounds of packaged fluid sales, down 1.9% from August 2018.
Conventional product sales totaled 3.7 billion pounds, down 1.7% from a year ago. Organic products, at 208 million pounds, were down 6.6% and represented 5.4% of total sales for the month.
Whole milk sales hit 1.3 billion pounds, up 0.8% from a year ago and made up 33.4% of total fluid sales in the month. Sales for the eight-month period totaled 10 billion pounds, up 1.1% from a year ago.
Skim milk sales, at 274 million pounds, were down 9.7% and made up 7.1% of total milk sales for the month.
Packaged fluid milk sales, January through August totaled 30.4 billion pounds, down 1.8% from a year ago.
Conventional products year-to-date amounted to 28.8 billion pounds, down 1.7%. Organic products, at 1.7 billion, were down 3.8% and represented about 5.4% of total fluid milk sales for the period.